Novus Blog

How Novus and the Mayors of the North West can build a better future

Businesses across the North West watched the recent Greater Manchester and Liverpool mayoral election races with interest: it is one of the most significant legislative changes in the region in recent years, with potentially far-reaching consequences for businesses, individuals and other areas of the UK.

As the dust settles on the campaign trail, it is encouraging to see Andy Burnham and Steve Rotheram begin the hard work of implementing the policies promised, such as Mr Burnham’s pledge to end homelessness.

Thanks to our work with the Macari Centre, where we recently launched our Skills for Life initiative, we understand the issues around homelessness and it is gratifying to see the mayor taking the problem so seriously. However, we believe that equipping people with skills is a key part of preventing and addressing homelessness and poverty, and we think there is a big opportunity for Mr Burnham and Mr Rotheram to lead the way on skills in the North West.

The skills shortage in construction is widely known, and is part of the reason that we dedicate time and effort to training apprentices and offering skills to those looking to start a career in this industry. The potential shortfall in the North West is significant: a recent report by the Construction Industrial Training Board (CITB) showed that the number of extra recruits required to service the North West’s construction sector over the next five years is 5,140 per year.

The same report states that the North West is projected to see the annual average growth of 2.5 percent in total construction output between now and 2021. But without helping people to gain the skills they need to support the industry, the predicted growth in the sector could stagnate. That’s why we hope that securing this growth by addressing the skills shortage will become a priority for Mr Burnham and Mr Rotheram’s first year in office.

In London, mayor Sadiq Khan has already acknowledged that strengthening the construction sector is key to the capital’s success, with the launch of his Construction Skills Academy set for later this year. The North West should follow in his footsteps, with the new mayors working with companies like Novus to encourage young people and those from outside of the industry to consider a career in construction.

Novus Property Solutions director, Chris Walford, said: “We know from our own work with apprentices and young people that our region has a vast pool of talent to draw from, and large-scale projects such as HS2 and the ongoing work at the University of Manchester mean that the industry will remain a lucrative one for many years to come. Equipping people with skills relevant to this growing industry will help with Mr Burnham’s quest to tackle homelessness, providing access to work and a potential route out of poverty.

“Devolved power in Greater Manchester presents an excellent opportunity for the whole of the north west region, with the chance to shape the political and economic agenda, and we are very excited about the coming months.”

With the right direction and political will, the North West can become a construction powerhouse, equipping people with skills required not just for the immediate future but for the next five or 10 years. Companies like ours can work with Andy Burnham and Chris Rotheram to make the North West a true economic powerhouse, and our industry can lead the way.

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BEING STRICTER ON BAD PAYERS

Neil Washington, Finance Director at contractor Novus Property Solutions, explains how clients and the industry should work harder to enforce better payment practices to strengthen the SME supply chain
The obligation on firms to disclose their payment terms came into effect in 2017 but judging by the headlines so far in 2019, many industries are still struggling to meet best practice. The construction industry is not alone, yet the subject of late payments in the sector has very specific ramifications for its long-term health.
You can see how the industry got itself into this state. Many of the largest listed contractors operate on extremely tight margins and must satisfy investors in the City. Paying subcontractors promptly can often fall down the list of priorities, either deliberately or not.
At Novus we’ve strived to reduce our payment terms because of the issues late payment causes. We now take only 26 days to pay subcontractors on average and this puts us in the top five quickest among the industry’s largest 100 contractors ranked by Construction News, where the average time to pay is 43 days. We don’t have any different accounting methods or invoicing systems, it’s purely in our culture to pay our subcontractors on time. We’re a family-owned business and that plays a part in cultivating values like this.
But the construction industry is a varied beast and each contractor has different internal pressures. In some cases, larger contractors will use cash which is due to be paid to their supply chain as working capital and without pressure from clients to change this, it could carry on for a long time. While late payments must now be recorded and published, more could be done to accelerate change.
The issues it causes
Main contractors and their supply chains have a symbiotic relationship. Paying on time and ensuring that subcontractors can maintain good cashflow means that they will be more likely to accept more work and do a good quality job.
It’s also rare that a subcontractor will only be working for just one bad payer at any given time. This can so drastically affect their cashflow that they risk going bust. The industry faces a huge skills shortage and access to labour, particularly specialist skills, is increasingly difficult. Often these skills come from smaller businesses. A weakened supply chain drives up costs and results in longer project timeframes for clients.
What can larger contractors and clients do?
While most clients stipulate good payment terms when appointing a major contractor, very few follow this up during projects. We’d advocate a review of payment practice statistics as part of the bidding process and spot checks on payments during contract periods to ensure contractors are making good on their promises.
It’s clear that public shaming may not be doing enough to push the industry and going against the curve like Novus has done can be difficult, particularly when your competitors aren’t doing much themselves. Direction from clients could initiate a huge change for the benefit of local businesses while reducing long-term construction costs.